Hi, I was wondering if prop firms allow you to use their capital to buy bonds? If so which firm would you recommend and what kind of margin req they have? Thanks.
Most prop firms are limited to non-OTC securities. You would need a firm that offers a full suite of Prime Brokerage services. What are you looking to trade?
Thanks for the replay. So, I should look into Prime Brokerage services? I am looking to trade Corporate Bonds. I want to know where to go to get more leverage then the standard retail brokerages.
Look into mini-prime accounts, or at least someone who can provide clearing and a DVP capability. Keep in mind you need an account size somewhere in the neighborhood of a million bucks to really even be considered by the smallest of the mini-primes. As far leverage is concerned, I'm unsure the rule of thumb for corporates, but I know for muni's an estimate is 8-to-1 for short term hold periods. As far as prop is concerned, the more sophisticated shops trade bonds. But unless you are a prop level quality trader with asset class experience and P/L history, it's very unlikely they will talk to you. Keep in mind I'm talking about the true prop firms, not the chop shops where you show up with $5,000 and they provide leverage.
Interesting thread. Are you guys trading high yield/distressed debt for equity swap kind of speculative plays where you could have some serious movement in the notes. And/Or are you employing strategies that are more of a function of interest rates and how the stock markets move conversely; i.e. a week ago, Wal Mart 2035 notes were asking $98.90; today they are bidding $95.00. So thats roughly a spread of $40 to capture there. No one talks about trading bonds on this site, but I think it has some major potential. My only concern would be liquidity and how much you would give up to close a position. I have found that if you are buying with any kind of decent size, you generally can get them $5 below the asking price.
One other intersting point is the fact that while you are holding your position, you are earning income, assuming its not a zero-coupon, so that would basically more than offset any margin related interest/expense and potentially add to your bottom line.
Interesting question. Wonder if there is a prop that has access to and can sponsor you for cash bonds and OTC derivatives? Most ET prop guys aren't going to have the money to trade in large enough lot sizes for it to work though.
Schneider, Marex, Tower Trading, Futex, Xconnect etc are bond prop houses but London based. You can trade cash bonds but mainly cash treasuries, never heard of corporate being done at these places. Mostly do futures of bund, bobl, schatz, gilts, tnotes, tbonds etc